Sweden's Finance Ministry is investigating possible reforms to the national pension buffer funds, the AP Funds, as the share of unlisted assets grows.
In an Oct. 23 announcement, the ministry said that the internal investigation will review AP Funds' operations "in order to modernize and streamline the management of the pension funds," and should report back by March 2024.
The buffer funds have 2 trillion Swedish kronor ($182 billion) collectively, and have gone through several reforms, including 2019 changes to investment rules, "but there is still a need for reform," Minister for Financial Markets Niklas Wykman said in an opinion article in Swedish daily Dagens Nyheter.
He noted that the share of the AP Funds' investments in real estate, venture capital and infrastructure has doubled in just ten years. "There are good reasons to invest in unlisted assets, but such investments require high levels of governance and transparency," Wykman wrote.
"Market values are set more infrequently and contain a greater element of individual judgment. Remuneration to external managers is often higher but is less transparently reported." Rules for fund board directors might also need updating, he said.
The investigation will look at whether AP6 can be integrated into the system, including a possible merger with AP2 for economic reasons. The AP funds together cost taxpayers SEK 2 billion a year to operate.
AP2, Gothenburg, had 423.9 billion Swedish kronor in assets as of June 30, with a total 38.3% exposure to listed equities across Swedish, developed markets and emerging markets, according to its half-year report.
AP6, also in Gothenburg, had 66.5 billion Swedish kronor according to its 2022 annual report.